When IFRS 16 came into effect, it significantly changed how companies account for leases, bringing most leases onto the balance sheet. For many businesses, this shift was more than a simple accounting change; it was an operational challenge.
Whether you’re managing a handful of office leases or a large, diverse lease portfolio across regions, navigating IFRS 16 requires accuracy, consistency, and the right technical support. And that’s where actuarial expertise plays a crucial role.
Why Lease Accounting Is More Complicated Than It Looks
Under IFRS 16, companies must recognise a Right-of-Use (ROU) asset and a corresponding lease liability for most leases. While that sounds straightforward, the actual calculations are far from simple.
For example:
- What discount rate should be used when a lease’s implicit rate isn’t available?
- How do you estimate the lease term, especially with renewal or termination options?
- How should variable payments or modifications be handled mid-lease?
Even small assumptions, like when a lease ends or whether an option will be exercised, can significantly affect the numbers reported on your balance sheet.
SHMA’s Role: Bringing Precision and Peace of Mind
At SHMA, we support businesses in navigating IFRS 16 with confidence. Our actuarial team helps ensure your lease calculations are not only accurate and efficient but also fully compliant with the standard.
Whether you’re implementing IFRS 16 for the first time or refining your existing process, we can support you with:
Accurate ROU Asset & Lease Liability Calculations
- Initial recognition of lease assets and liabilities
- Determining appropriate discount rates using incremental borrowing rates
- Handling complex lease terms, extensions, and early terminations
- Accounting for variable lease payments and reassessments
- Supporting lease modifications and remeasurement processes
Independent Reviews of Existing Models
Already using a model? We offer independent assessments to:
- Validate your discount rate and lease term methodologies
- Review how your leases are segmented and treated
- Evaluate your modification accounting
- Recommend improvements for efficiency or compliance
A Practical, Phased Approach
Our work is guided by a clear, collaborative process:
- Assessment – We review your current lease portfolio and reporting needs
- Design – We tailor calculation methods to your lease types and complexity
- Implementation – We build and document robust, audit-ready models
- Ongoing Support – As your lease portfolio evolves, we keep you up to date
Lease accounting doesn’t have to be a headache. With the right technical guidance and actuarial insight, your business can move from compliance confusion to reporting clarity.
If your lease portfolio is growing — or just getting more complex — we’re here to help you stay ahead.